What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-28 compared with 2021-03-01 · 175 added, 267 removed, 1108 unchanged (29% of the section changed)

14 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2020, of the Company and our report dated March 1, 2021, expressed an unqualified opinion on those financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2021, of the Company and our report dated February 28, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

16 unchanged sentences

Costa Mesa, California

March 1, 2021

February 28, 2022

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICITONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

26 unchanged sentences

The following documents are filed as a part of this Form 10-K:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting F irm (PCAOB ID No.

Financial Statements:

10 unchanged sentences

INDEX TO EXHIBITS

The following designated exhibits, as indicated below, are either filed or furnished, as applicable herewith or have heretofore been filed or furnished with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as indicated by footnote.

Transaction Agreement, dated as of August 14, 2014, by and among Monster Beverage Corporation, New Laser Corporation, New Laser Merger Corp, The Coca-Cola Company and European Refreshments (incorporated by reference to Exhibit 2.1 to our Form 8-K dated August 18, 2014).

1 unchanged sentence

Asset Transfer Agreement, dated as of August 14, 2014, by and among Monster Beverage Corporation, New Laser Corporation and The Coca-Cola Company (incorporated by reference to Exhibit 2.2 to our Form 8-K dated August 18, 2014).

Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to our Form 10-Q dated November 7, 2016).

Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to our Form 10-K dated November 7, 2016).

Second Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to our Form 8-K dated April 16, 2018).

4 unchanged sentences

Form of Indemnification Agreement (to be provided by Monster Beverage Corporation to its directors and officers) (incorporated by reference to Exhibit 10.1 to our Form 8-K dated June 11, 2019).

Form of Restricted Stock Unit Agreement for grants under the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors.

Form of Restricted Stock Unit Agreement pursuant to the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.4 to our Form 10-K dated March 1, 2021).

Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated August 9, 2011).

8 unchanged sentences

Form of Performance Share Unit Award Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to our Form 10-Q dated May 11, 2020).

Form of Restricted Stock Unit Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan.

Form of Restricted Stock Unit Agreement of Co-Chief Executive Officers for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan.

Form of Restricted Stock Unit Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to our Form 10-K dated March 1, 2021).

Form of Restricted Stock Unit Agreement of Co-Chief Executive Officers for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to our Form 10-K dated March 1, 2021).

Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Appendix A to our Definitive Proxy Statement on Schedule 14A, filed April 21, 2020).

2 unchanged sentences

Amended and Restated Monster Beverage Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.14 to our Form 10-K dated March 1, 2018).

Form of Stock Option Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated May 7, 2021).

Form of Annual Incentive Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to our Form 10-Q dated May 7, 2021).

Form of Performance Share Unit Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to our Form 10-Q dated May 7, 2021).

Form of Restricted Stock Unit Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to our Form 10-Q dated May 7, 2021).

Consent of Independent Registered Public Accounting Firm

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/s/ RODNEY C.

March 1, 2021

February 28, 2022

Chairman of the Board of

2 unchanged sentences

/s/ HILTON H.

March 1, 2021

February 28, 2022

Vice Chairman of the Board of

4 unchanged sentences

Chairman of the Board of

March 1, 2021

February 28, 2022

Directors and Co-Chief Executive

2 unchanged sentences

Vice Chairman of the Board of Directors

March 1, 2021

February 28, 2022

and Co-Chief Executive Officer (principal

2 unchanged sentences

Chief Financial Officer (principal financial

March 1, 2021

February 28, 2022

officer, principal accounting officer)

March 1, 2021

/s/ ANA DEMEL

February 28, 2022

/s/ TIFFANY M.

February 28, 2022

/s/ JEANNE P.

March 1, 2021

February 28, 2022

/s/ STEVEN G.

March 1, 2021

February 28, 2022

/s/ BENJAMIN M.

March 1, 2021

/s/ SYDNEY SELATI

March 1, 2021

Sydney Selati

March 1, 2021

February 28, 2022

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

14 unchanged sentences

Critical Audit Matter Description

The Company’s promotional and other allowances are calculated based on various programs with its bottlers/distributors and retail customers, and accruals are established during the year for its anticipated liabilities.

These accruals are based on agreed-upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or distributor and retail customer performance levels.

The Company’s promotional and other allowances are calculated based on various programs with its bottlers/distributors and retail customers, and accruals are established at the time of the initial product sale for the Company’s anticipated liabilities.

These accruals are based on agreed-upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or bottler/distributor and retail customer performance levels.

Promotional and other allowances primarily include consideration given to bottlers/distributors or retail customers, including, but not limited to, the following:

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and (viii) certain commissions paid based on sales to bottlers/distributors.

The length of promotional programs can vary from as little as one day, for one-time events, to as long as one year based on the agreed-upon terms.

The promotional programs are of varying durations, typically ranging from one week to one year based on the agreed-upon terms.

The nature of such programs is determined on a per retail customer basis, and in certain instances, the same program is set for multiple retail customers.

14 unchanged sentences

Costa Mesa, California

March 1, 2021

February 28, 2022

We have served as the Company’s auditor since 1991.

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Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Common stock in treasury, at cost;

110,565 and 99,762 shares as of December 31, 2020 and December 31, 2019, respectively

110,720 shares and 110,565 shares as of December 31, 2021 and December 31, 2020, respectively

( 5,829,253 )

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OPERATING INCOME

OTHER (EXPENSE) INCOME, NET

OTHER INCOME (EXPENSE), NET

INCOME BEFORE PROVISION FOR INCOME TAXES

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Net income, as reported

Other comprehensive income (loss):

Other comprehensive (loss) income:

Change in foreign currency translation adjustment, net of tax

3 unchanged sentences

Net change in available-for-sale investments

Other comprehensive income (loss)

Other comprehensive (loss) income

Comprehensive income

13 unchanged sentences

Adjustment to excess tax benefits from prior periods

2016-16 adoption

Repurchase of common stock

( 1,342,076 )

Foreign currency translation

3 unchanged sentences

Exercise of stock options

Unrealized gain on available-for-sale securities

Adjustment to excess tax benefits from prior periods

Unrealized loss on available-for-sale securities

Repurchase of common stock

16 unchanged sentences

Depreciation and amortization

Non-cash lease expense

Gain on disposal of property and equipment

4 unchanged sentences

Accounts receivable

Distributor receivables

Prepaid expenses and other assets

3 unchanged sentences

Accrued promotional allowances

Accrued distributor terminations

Accrued compensation

9 unchanged sentences

( 1,299,981 )

( 1,067,736 )

Purchases of property and equipment

1 unchanged sentence

Increase in other assets

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on debt

Borrowings (payments) on debt

Issuance of common stock

Purchases of common stock held in treasury

( 1,342,076 )

Net cash used in financing activities

( 1,316,111 )

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

9 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS:

Accrued liabilities included additions to intangibles of $ 9.8 million, $ 12.8 million and $ 10.8 million as of December 31, 2020, 2019 and 2018, respectively.

Included in accrued liabilities as of December 31, 2021, 2020 and 2019 were $ 14.0 million, $ 9.8 million and $ 12.8 million, respectively, related to net additions to other intangible assets.

Accounts payable included purchases of available-for-sale short-term investments of $ 8.7 million as of December 31, 2019.

No amounts were included as of December 31, 2020 and December 31, 2018.

No purchases of available-for-sale investments were included in accounts payable as of December 31, 2021 and December 31, 2020.

See accompanying notes to consolidated financial statements.

6 unchanged sentences

Nature of Operations – The Company develops, markets, sells and distributes energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names:

Monster Energy®, Monster Energy Ultra®, Monster Rehab®, Monster MAXX®, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro®, Monster HydroSport Super Fuel®, Monster Super Fuel®, Predator®, Fury®, Reign Total Body Fuel®, Reign Inferno® Thermogenic Fuel, Monster Dragon Tea®, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator®, Samurai® and Live+®.

Monster Energy®, Monster Energy Ultra®, Rehab® Monster, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro® Energy Water, Monster Hydro® Super Sport, Monster HydroSport Super Fuel®, Monster Super Fuel®, Monster Dragon Tea®, Reign Total Body Fuel®, Reign Inferno® Thermogenic Fuel, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator®, Samurai®, Live+®, Predator®, Fury® and True North®.

Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries.

10 unchanged sentences

The Company has not experienced any loss as a result of these deposits and does not expect to incur any losses in the future.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Investments – The Company’s investments in debt securities are classified as either held-to-maturity, available-for-sale or trading, in accordance with FASB ASC 320.

7 unchanged sentences

FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

Under FASB ASC 326-30-35, a security is considered to be impaired if the fair value of the security is less than its amortized

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Under FASB ASC 326-30-35, a security is considered to be impaired if the fair value of the security is less than its amortized cost basis.

Where the decline in fair value below the amortized cost basis has resulted from a credit loss, the Company will record an impairment relating to credit losses through an allowance for credit losses.

3 unchanged sentences

This evaluation consists of a review by management, and includes market pricing information and maturity dates for the securities held, market and economic trends in the industry and information on the issuer’s financial condition and, if applicable, information on the guarantors’ financial condition.

Factors considered in determining whether an impairment has resulted from credit loss or other factors include the length of time and extent to which the investment’s fair value has been less than its cost basis, the financial condition and near-term prospects of the issuer and guarantors, including any specific events which may influence the operations of the issuer and our intent and ability to retain the investment for a reasonable period of time sufficient to allow for any anticipated recovery of fair value.

Factors considered in determining whether an impairment has resulted from credit loss or other factors include the length of time and extent to which the investment’s fair value has been less than its cost basis, the financial condition and near-term prospects of the issuer and guarantors, including any specific events which may influence the operations of the issuer and the Company’s intent and ability to retain the investment for a reasonable period of time sufficient to allow for any anticipated recovery of fair value.

Accounts Receivable – The Company evaluates the collectability of its trade accounts receivable based on a number of factors.

5 unchanged sentences

Property and Equipment – Property and equipment are stated at cost.

Depreciation of furniture and fixtures, office and computer equipment, computer software, equipment, and vehicles is based on their estimated useful lives ( three to ten years ) and is calculated using the straight-line method.

Depreciation of furniture and fixtures, office and computer equipment, computer software, equipment, real property and vehicles is based on their estimated useful lives ( three to thirty years ) and is calculated using the straight-line method.

Amortization of leasehold improvements is based on the lesser of their estimated useful lives or the terms of the related leases and is calculated using the straight-line method.

2 unchanged sentences

The related costs and accumulated depreciation of disposed assets are eliminated and any resulting gain or loss on disposition is included in net income.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Goodwill – The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired, including related tax effects.

5 unchanged sentences

For the years ended December 31, 2021, 2020 and 2019 there were no impairments recorded and there are no accumulated impairment balances.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Monster Rehab®, Monster MAXX®, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro®, Monster HydroSport Super Fuel®, Monster Super Fuel®, Reign Total Body Fuel®, Reign Inferno®, Predator®, Fury®, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator® and Samurai® trademarks, all used in connection with the manufacture, sale and distribution of beverages.

Other Intangibles – Other Intangibles are comprised primarily of trademarks that represent the Company’s exclusive ownership of the Monster Energy®, ®, Monster Energy Ultra®, Monster Dragon Tea®, Unleash the Beast!®, Rehab® Monster, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro®, Monster HydroSport Super Fuel®, Monster Super Fuel®, Reign Total Body Fuel®, Reign Inferno®, Predator®, Fury®, True North®, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator®, and Samurai® trademarks, all used in connection with the manufacture, sale and distribution of beverages.

The Company also owns a number of other trademarks, flavors and formulas in the United States, as well as in a number of countries around the world.

3 unchanged sentences

The Company amortizes its trademarks with finite useful lives over their respective useful lives.

For the year ended December 31, 2020, an impairment charge of $ 8.7 million was recorded to intangibles.

For the years ended December 31, 2021 and 2019 no impairments were recorded.

For the year ended December 31, 2020, an impairment charge of $ 8.7 million was recorded to intangibles.

Leases – See Note 3.

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Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Foreign Currency Translation and Transactions – The accounts of the Company’s foreign subsidiaries are translated in accordance with FASB ASC 830.

8 unchanged sentences

Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in other income, net, in the consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item.

For the years ended December 31, 2020, 2019 and 2018, aggregate foreign currency transaction losses, including the gains or losses on forward currency exchange contracts, amounted to $ 11.2 million, $ 4.1 million and

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

$ 4.0 million, respectively, and have been recorded in other income, net, in the accompanying consolidated statements of income.

For the years ended December 31, 2021, 2020 and 2019, aggregate foreign currency transaction gains (losses), including the gains or losses on forward currency exchange contracts, amounted to $ 0.3 million, ($ 11.2 ) million and ($ 4.1 ) million, respectively, and have been recorded in other income, net, in the accompanying consolidated statements of income.

Revenue Recognition – See Note 2.

6 unchanged sentences

Freight-Out Costs – For the years ended December 31, 2021, 2020 and 2019, freight-out costs amounted to $ 213.9 million, $ 134.1 million and $ 122.5 million, respectively, and have been recorded in operating expenses in the accompanying consolidated statements of income.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Advertising and Promotional Expenses – The Company accounts for advertising production costs by expensing such production costs the first time the related advertising takes place.

10 unchanged sentences

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available at the reporting date.

For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

knowledge of all relevant information.

For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

8 unchanged sentences

The calculation of common equivalent shares assumes the exercise of dilutive stock options, net of assumed treasury share repurchases at average market prices, as applicable.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Concentration of Risk – Certain of the Company’s products utilize components (raw materials and/or co-packing services) from a limited number of sources.

1 unchanged sentence

The Company continues to endeavor to secure the availability of alternative sources for such components and minimize the risk of any disruption in production.

The Coca-Cola Company (“TCCC”), through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 2 %, 2 % and 3 % of the Company’s net sales for the years ended December 31, 2020, 2019 and 2018, respectively.

The Coca-Cola Company (“TCCC”), through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 2 %of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019.

Coca-Cola Consolidated, Inc.

1 unchanged sentence

Reyes Coca-Cola Bottling, LLC accounted for approximately 10 %, 11 % and 11 % of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Coca-Cola European Partners accounted for approximately 10 %of the Company’s net sales for the years ended December 31, 2020, 2019 and 2018.

Coca-Cola Europacific Partners accounted for approximately 12 %, 10 % and 10 % of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Credit Risk – The Company sells its products nationally and internationally, primarily to bottlers and full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

1 unchanged sentence

The Company maintains reserves for estimated credit losses, and historically, such losses have been within management’s expectations.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Fair Value of Financial Instruments – The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the relatively short maturity of the respective instruments.

1 unchanged sentence

Actual results could differ from those estimates.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “Simplifying the Accounting for Income Taxes”, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes.

2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP.

The guidance was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

The adoption of ASU No.

2019-12 did not have a material impact on the Company’s financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No.

2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No.

2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

2018-15 was effective for the Company on a prospective or retrospective basis beginning on January 1, 2020.

The adoption of ASU No.

2018-15 did not have a material impact on the Company’s financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No.

2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–General (Topic 715):

Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU No.

2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures.

2018-14 was effective for the Company on a retrospective basis beginning in the year ending December 31, 2020.

The adoption of ASU No.

2018-14 did not have a material impact on the Company’s disclosures, financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No.

2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements.

2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

2018-13 was effective for the Company beginning on January 1, 2020.

The adoption of ASU No.

2018-13 did not have a material impact on the Company’s disclosures, financial position, results of operations and liquidity.

Recent Accounting Pronouncements – In October 2021, the FASB issued Accounting Standards Update (“ASU”) No.

2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805)”.

2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of the ASU should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

The Company is currently evaluating the impact of ASU No.

2021-08 on its financial position, results of operations and liquidity.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(Tabular Dollars in Thousands, Except Per Share Amounts)

In January 2017, the FASB issued ASU No.

2017-04, “Intangibles and Other (Topic 350):

Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value.

This amendment was effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The adoption of ASU No.

2017-04 did not have a material impact on the Company’s financial position, results of operations and liquidity.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded.

2016-13 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2019.

The adoption of ASU No.

2016-13 did not have a material impact on the Company’s disclosures, financial position, results of operations and liquidity.

REVENUE RECOGNITION

1 unchanged sentence

The Company has three operating and reportable segments:

(i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks and Reign Total Body Fuel® high performance energy drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

(i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged energy drinks primarily to bottlers and full service beverage bottlers/distributors (“bottlers/distributors”).

In some cases, the Company sells directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

In some cases, the Company sells ready-to-drink packaged energy drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

The Company’s Strategic Brands segment primarily generates net operating revenues by selling “concentrates” and/or “beverage bases” to authorized bottling and canning operations.

9 unchanged sentences

The Company did not have any material unsatisfied performance obligations as of December 31, 2021 and December 31, 2020.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.

Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses in the consolidated statements of income.

Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

● discounts granted off list prices to support price promotions to end-consumers by retailers;

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

● reimbursements given to the Company’s bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;

4 unchanged sentences

● contractual fees given to the Company’s bottlers/distributors related to sales made directly by the Company to certain customers that fall within the bottlers’/distributors’ sales territories;

● commissions to TCCC based on the Company’s sales to certain wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to certain companies accounted for under the equity method by TCCC (the “TCCC Related Parties”).

● commissions to TCCC based on the Company’s sales to wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to TCCC bottlers/distributors accounted for under the equity method by TCCC (the “TCCC Related Parties”).

The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business.

3 unchanged sentences

Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.

Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years .

The Company also enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, hats, t-shirts, jackets, helmets and automotive wheels.

Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as deferred revenue and recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years .

The Company also sells and/or enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, backpacks, hats, t-shirts, jackets, helmets and automotive wheels.

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

42 unchanged sentences

Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the consolidated statement of income.

Interest expense on finance leases is calculated using the amortized cost basis and is included in other (expense) income, net in the consolidated statement of income.

Interest expense on finance leases is calculated using the amortized cost basis and is included in other income (expense), net in the consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 12 years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the leases within one year .

12 unchanged sentences

Total lease cost

Rent expense under operating lease agreements was $ 6.1 million for the year ended December 31, 2018.

Supplemental cash flow information for leases for the years ended December 31, 2021, 2020 and 2019 were as follows:

73 unchanged sentences

government agency securities

Variable rate demand notes

Municipal securities

government agency securities

1 unchanged sentence

The Company’s investments at December 31, 2021 and 2020 carried investment grade credit ratings.

Variable rate demand notes (“VRDNs”) are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest.

All of the put options are secured by a pledged liquidity source.

While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

12 unchanged sentences

Due 1 - 10 years:

Municipal securities

government agency securities

Variable rate demand notes

Due 11 - 20 years:

Variable rate demand notes

Due 21 - 30 years:

Variable rate demand notes

Due 31 - 40 years:

Variable rate demand notes

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

29 unchanged sentences

Commercial paper

Variable rate demand notes

Municipal securities

9 unchanged sentences

(Tabular Dollars in Thousands, Except Per Share Amounts)

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 within the fair value hierarchy.

The Company’s valuation of its Level 1 investments, which include money market funds, is based on quoted market prices in active markets for identical securities.

The Company’s valuation of its Level 2 investments, which include municipal securities, commercial paper, U.S.

treasuries, certificates of deposit, VRDNs and U.S.

government agency securities, is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities.

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy.

The Company’s valuation of its Level 1 investments is based on quoted market prices in active markets for identical securities.

The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities.

The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk.

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Accounts receivable, net

Receive USD/pay COP

Accounts receivable, net

Receive RSD/pay USD

Accounts receivable, net

Receive USD/pay RUB

Accounts receivable, net

Foreign currency exchange contracts:

Receive EUR/pay USD

Accrued liabilities

Receive USD/pay GBP

2 unchanged sentences

Accrued liabilities

Receive USD/pay ZAR

Accrued liabilities

Receive USD/pay COP

Accrued liabilities

Receive USD/pay CNY

Accrued liabilities

Receive USD/pay RUB

Accrued liabilities

Receive NOK/pay USD

Accrued liabilities

Receive USD/pay NZD

Accrued liabilities

Receive SEK/pay USD

Receive USD/pay EUR

Accrued liabilities

Receive USD/pay ZAR

Accrued liabilities

Receive USD/pay DKK

6 unchanged sentences

Foreign currency exchange contracts:

Receive EUR/pay USD

Receive SGD/pay USD

Accounts receivable, net

1 unchanged sentence

Accounts receivable, net

Receive NOK/pay USD

Accounts receivable, net

Receive USD/pay SGD

Accounts receivable, net

Foreign currency exchange contracts:

Receive EUR/pay USD

Accrued liabilities

Receive USD/pay GBP

2 unchanged sentences

Accrued liabilities

Receive USD/pay ZAR

Accrued liabilities

Receive USD/pay COP

Accrued liabilities

Receive USD/pay CNY

Accrued liabilities

Receive USD/pay RUB

Accrued liabilities

Receive USD/pay NZD

Receive NOK/pay USD

Accrued liabilities

Receive USD/pay ZAR

Receive USD/pay NZD

Accrued liabilities

Receive USD/pay COP

Receive SEK/pay USD

Accrued liabilities

13 unchanged sentences

Foreign currency exchange contracts

Other (expense) income, net

Other income (expense), net

Inventories consist of the following at December 31:

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Total amortization expense recorded was $ 4.4 million, $ 7.7 million and $ 11.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Total impairment recorded was $ 8.7 million for the year ended December 31, 2020.

No impairment was recorded for the years ended December 31, 2021 and 2019.

Total impairment recorded was $ 8.7 million for the year ended December 31, 2020.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

8 unchanged sentences

As a result, the Company incurred termination costs of $ 5.3 million, $ 0.2 million and $ 11.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Such termination costs have been expensed in full and are included in operating expenses for the years ended December 31, 2020, 2019 and 2018.

Such termination costs have been expensed in full and are included in operating expenses in the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019.

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective distribution agreement, generally 20 years .

7 unchanged sentences

The Company had no outstanding standby Letters of Credit at December 31, 2021.

In December 2016, the Company entered into a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch consisting of a non-collateralized working capital line of credit.

In February 2018, the working capital line limit was increased to $ 15.0 million.

The Company has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, of $ 15.0 million.

At December 31, 2021, the interest rate on borrowings under the line of credit was 5.5 %.

As of December 31, 2020, the Company had no amounts outstanding on this line of credit.

As of December 31, 2021, $ 5.8 million was outstanding on this line of credit.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

The Company is obligated under various non-cancellable lease agreements providing for office space, warehouse space, vehicles and warehouse equipment that expire at various dates through the year 2033.

Contractual Obligations – The Company had the following contractual obligations related primarily to sponsorships and other commitments as of December 31, 2020:

Contractual Obligations – The Company had the following contractual obligations related primarily to sponsorships, other marketing activities and AFF new production facility construction costs as of December 31, 2021:

Year Ending December 31:

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Although it is not possible to predict the ultimate outcome of such litigation, based on the facts known to the Company, management believes that such litigation in aggregate will likely not have a material adverse effect on the Company’s financial position or results of operations.

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, and any related insurance reimbursements.

As of December 31, 2021, no loss contingencies were included in the Company’s consolidated balance sheet.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

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(Tabular Dollars in Thousands, Except Per Share Amounts)

On September 18, 2020, a derivative complaint was filed on purported behalf of the Company in the United States District Court for the Central District of California.

The action is styled Falat v.

Sacks, et al., 8:20-cv-01782 , and asserts claims against certain officers, current and former directors, and employees of the Company, including Rodney C.

Sacks, Hilton H.

Schlosberg, Guy P.

Carling, Thomas J.

Kelly, Emelie C.

Tirre, Mark J.

Hall, Kathleen E.

Ciaramello, Gary P.

Fayard, Jeanne P.

Jackson, Steven G.

Pizula, Benjamin M.

Polk, Sydney Selati and Mark S.

Vidergauz (collectively, the “Individual Defendants”).

The Company is named as a nominal defendant.

The derivative complaint alleges, among other things, that the Individual Defendants breached their fiduciary duties to the Company by allowing others to cause, or themselves causing, the Company to hide discrimination and failing to ensure sufficient diversity, including by permitting conduct to occur that was inconsistent with statements made in the Company’s policies and disclosures, and failing to ensure the Company’s compliance with laws regarding diversity and anti-discrimination.

The complaint also asserts claims for abuse of control, unjust enrichment and violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The complaint seeks from the Individual Defendants an unspecified amount of damages, restitution, punitive damages and costs to be paid to the Company, and seeks to require the Company to adopt corporate governance reforms, and other equitable relief.

On January 15, 2021, the Company filed a motion to dismiss the action because the plaintiff failed to make a demand on the Company as required by Federal Rule of Civil Procedure 23.1 or to show that demand would have been futile.

The Individual Defendants also filed a motion to dismiss the complaint for failure to state a claim against the Individual Defendants, among other reasons.

Those motions are scheduled for hearing in the 2021 second quarter.

While the Company continues to evaluate these claims, management believes that such litigation will likely not have a material adverse effect on the Company’s financial position or results of operations.

As of December 31, 2020, the Company’s consolidated balance sheet included accrued loss contingencies of approximately $ 18.4 million.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) are as follows at December 31:

Accumulated net unrealized (gain) loss on available-for-sale securities

Accumulated net unrealized (loss) gain on available-for-sale securities

Foreign currency translation adjustments, net of tax

Total accumulated other comprehensive income (loss)

Total accumulated other comprehensive (loss) income

TREASURY STOCK PURCHASE

On February 26, 2019, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $ 500.0 million of the Company’s outstanding common stock (the “February 2019 Repurchase Plan”).

During the year ended December 31, 2020, the Company purchased 0.6 million shares of common stock at an average purchase price of $ 58.16 per share, for a total amount of $ 36.6 million (excluding broker commissions), which exhausted the availability under the February 2019 Repurchase Plan.

Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at December 31, 2020.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

On November 6, 2019, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $ 500.0 million of the Company’s outstanding common stock (the “November 2019 Repurchase Plan”).

During the year ended December 31, 2020, the Company purchased 9.1 million shares of common stock at an average purchase price of $ 54.86 per share, for a total amount of $ 499.9 million (excluding broker commissions), which exhausted the availability under the November 2019 Repurchase Plan.

Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at December 31, 2020.

On March 13, 2020, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $ 500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”).

During the year ended December 31, 2020, the Company purchased 1.0 million shares of common stock at an average purchase price of $ 55.85 per share, for a total amount of $ 58.5 million (excluding broker commissions), under the March 2020 Repurchase Plan.

Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at December 31, 2020.

As of March 1, 2021, $ 441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

During the year ended December 31, 2021, no shares were purchased under the March 2020 Repurchase Plan.

As of February 28, 2022, $ 441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

During the year ended December 31, 2021, 0.2 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of $ 13.8 million.

6 unchanged sentences

The 2020 Omnibus Incentive Plan replaced the Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011 Omnibus Incentive Plan”).

The 2020 Omnibus Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other share-based awards up to an aggregate of 46,169,367 shares of the Company’s common stock, comprised of 32,000,000 new shares of common stock reserved under the 2020 Omnibus Incentive Plan and 14,169,367 shares of common stock that were available for grant under the 2011 Omnibus Incentive Plan as of December 31, 2019 and prior to the Effective Date.

Shares authorized under the 2020 Omnibus Incentive Plan are reduced by one (1) share for options or stock appreciation rights granted under the 2020 Omnibus Incentive Plan and for any grants after December 31, 2019 under the 2011 Omnibus Incentive Plan, and by 2.6 shares for each share granted or issued with respect to a Full Value Award under either the 2020 Omnibus Incentive Plan or for any shares granted after December 31, 2019 under the 2011 Omnibus Incentive Plan.

A “Full Value Award” is an award other than an incentive stock option, a non-qualified stock option, or a stock appreciation right, which is settled by the issuance of shares.

Options granted under the 2020 Omnibus Incentive Plan may be incentive stock options under Section 422 of the Internal Revenue Code, as amended (the “Code”), or non-qualified stock options.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(Tabular Dollars in Thousands, Except Per Share Amounts)

The 2020 Omnibus Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other share-based awards up to an aggregate of 46,169,367 shares of the Company’s common stock, comprised of 32,000,000 new shares of common stock reserved under the 2020 Omnibus Incentive Plan, which were authorized on the Effective Date, and 14,169,367 shares of common stock that were available for grant under the 2011 Omnibus Incentive Plan as of December 31, 2019 and prior to the Effective Date.

A “Full Value Award” is an award other than an incentive stock option, a non-qualified stock option, or a stock appreciation right, which is settled by the issuance of shares.

Options granted under the 2020 Omnibus Incentive Plan may be incentive stock options under Section 422 of the Internal Revenue Code, as amended (the “Code”), or non-qualified stock options.

Shares previously granted under the 2011 Omnibus Incentive Plan after December 31, 2019 and prior to the Effective Date of the 2020 Omnibus Incentive Plan reduced the number of shares available for grant under the 2020 Omnibus Incentive Plan.

As of December 31, 2021, 2,755,257 shares of the Company’s common stock have been granted, net of cancellations, and 42,513,457 shares (as adjusted for Full Value Awards) of the Company’s common stock remain available for grant under the 2020 Omnibus Incentive Plan.

The Compensation Committee of the Board of Directors (the “Compensation Committee”) has sole and exclusive authority to grant stock awards to all employees who are not new hires and to all new hires who are subject to Section 16 of the Exchange Act.

Each of the Compensation Committee and the Executive Committee of the Board of Directors (the “Executive Committee”) independently has the authority to grant stock awards to new hires and employees receiving a promotion who are not Section 16 employees.

Each of the Compensation Committee and the Executive Committee of the Board of Directors (the “Executive Committee”) independently has the authority to grant stock awards to (i) new hires and (ii) employees receiving a promotion, in each case, who are not Section 16 employees.

Awards granted by the Executive Committee are not subject to approval or ratification by the Board of Directors or the Compensation Committee.

7 unchanged sentences

The 2017 Directors Plan permits the granting of stock options, stock appreciation rights, restricted shares or restricted stock units, deferred awards, dividend equivalents, and other share based-awards up to an aggregate of 1,250,000 shares of common stock of the Company to non-employee directors of the Company.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

Each calendar year, a non-employee director will receive an annual retainer and annual equity award, as provided for in the 2017 Directors Plan, which may be modified from time to time.

5 unchanged sentences

As of December 31, 2021, 98,901 shares of the Company’s common stock had been granted under the 2017 Directors Plan, and 1,151,099 shares of the Company’s common stock remain available for grant.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

In 2017, the Company adopted the Deferred Compensation Plan for Non-Employee Directors (as a sub plan to the 2017 Directors Plan), pursuant to which the Board of Directors may permit non-employee directors to elect, at such times and in accordance with rules and procedures (or sub-plan) adopted by the Board of Directors (which are intended to comply with Section 409A of the Code, as applicable), to receive all or any portion of such non-employee director’s compensation, whether payable in cash or in equity, on a deferred basis.

4 unchanged sentences

Each award granted under the 2017 Directors Plan will be evidenced by a written agreement and will contain the terms and conditions that the Board of Directors deems appropriate.

Under the 2017 Directors Plan, the Board of Directors requires each non-employee director to satisfy the share ownership guidelines set forth below, as may be amended by the Board of Directors from time to time.

In February 2022, the Board of Directors amended and restated the 2017 Directors Plan to require each non-employee director to satisfy the share ownership guidelines set forth below, as may be modified by the Board of Directors from time to time.

The current share ownership guidelines provide that non-employee directors of the Company must:

● Hold at least 9,000 shares of Company common stock.

● Hold shares of Company common stock having a total value of five times the annual retainer payable to a non-employee director (excluding any portion of the annual retainer attributable to a non-employee director’s service as a member of a subcommittee, as a chair of a subcommittee or as the lead independent director, as applicable).

For this purpose, deferred shares or deferred restricted stock units will be deemed held, to the extent vested.

● The minimum stock ownership level must be achieved by each non-employee director by the third anniversary of such non-employee director’s initial appointment to the Board of Directors.

● The minimum stock ownership level must be achieved by each non-employee director by the fifth anniversary of such non-employee director’s initial appointment to the Board of Directors.

● Once achieved, ownership of the guideline amount should be maintained for so long as the non-employee director retains his or her seat on the Board of Directors.

2 unchanged sentences

The Company recorded $ 70.5 million, $ 70.3 million and $ 63.4 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the years ended December 31, 2021, 2020 and 2019, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the years ended December 31, 2021, 2020 and 2019 was $ 6.8 million, $ 10.5 million and $ 25.9 million, respectively.

4 unchanged sentences

The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The following weighted-average assumptions were used to estimate the fair value of options granted during:

13 unchanged sentences

The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The following table summarizes the Company’s activities with respect to its stock option plans as follows:

(in thousands)

Outstanding at January 1, 2021

7 unchanged sentences

Exercisable at December 31, 2021

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The following table summarizes information about stock options outstanding and exercisable at December 31, 2021:

1 unchanged sentence

Options Exercisable

Weighted Average

Range of Exercise

Outstanding (In

(In Thousands)

The weighted-average grant-date fair value of options granted during the years ended December 31, 2021, 2020 and 2019 was $ 25.80 per share, $ 18.82 per share and $ 20.17 per share, respectively.

1 unchanged sentence

Cash received from option exercises under all plans for the years ended December 31, 2021, 2020 and 2019 was $ 45.7 million, $ 72.9 million and $ 92.4 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

At December 31, 2021, there was $ 51.3 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s share-based payment plans.

3 unchanged sentences

In the event that the Company has the option and intent to settle a restricted stock unit or performance share unit in cash, the award is classified as a liability and revalued at each balance sheet date.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

The following table summarizes the Company’s activities with respect to non-vested restricted stock units and performance share units as follows:

15 unchanged sentences

At December 31, 2021, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2022, 2023 and 2024.

At December 31, 2020, there was $ 2.3 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans.

That cost is expected to be recognized over a weighted-average period of 1.6 years.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(Tabular Dollars in Thousands, Except Per Share Amounts)

At December 31, 2021, there was $ 0.7 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans.

That cost is expected to be recognized over a weighted-average period of 1.0 years.

Employee and Non-Employee Share-Based Compensation Expense

1 unchanged sentence

Employee and non-employee share-based compensation expense of $ 70.5 million for the year ended December 31, 2021 is comprised of $ 8.3 million relating to incentive stock options, $ 1.6 million relating to other share-based awards and $ 60.6 million relating to non-qualified stock options, restricted units and performance units.

Employee and non-employee share-based compensation expense of $ 63.4 million for the year ended December 31, 2019 is comprised of $ 10.0 million relating to incentive stock options and $ 53.4 million relating to non-qualified stock options and restricted units.

Employee and non-employee share-based compensation expense of $ 70.3 million for the year ended December 31, 2020 is comprised of $ 9.4 million relating to incentive stock options, $ 2.7 million relating to other share-based awards and $ 58.2 million relating to non-qualified stock options, restricted units and performance units.

59 unchanged sentences

During the years ended December 31, 2021, 2020 and 2019, the Company established full valuation allowances against certain deferred tax assets, resulting from cumulative net operating losses incurred by certain foreign subsidiaries of the Company.

The effect of the valuation allowances and the subsequent related impact on the Company’s overall tax rate was to decrease the Company’s provision for income taxes by $ 5.4 million for the year ended December 31, 2020, and increase $ 3.7 million and $ 4.0 million for the years ended December 31, 2019 and 2018, respectively.

The effect of the valuation allowances and the subsequent related impact on the Company’s overall tax rate was to decrease the Company’s provision for income taxes by $ 8.1 million and $ 5.4 million for the years ended December 31, 2021 and 2020, respectively, and increase the Company’s provision for income taxes $ 3.7 million for the year ended December 31, 2019.

At December 31, 2021, the Company had net operating loss carryforwards of approximately $ 60.5 million.

11 unchanged sentences

Gross Unrecognized Tax

Balance at January 1, 2018

Balance at December 31, 2018

Additions for tax positions related to the current year

11 unchanged sentences

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s consolidated financial statements.

As of December 31, 2020, the Company had accrued approximately $ 0.1 million in interest and penalties related to unrecognized tax benefits.

If the Company were to prevail on all uncertain tax positions it would not have a significant impact on the Company’s effective tax rate.

As of December 31, 2021, the Company had no unrecognized tax benefits.

It is expected that any change in the amount of unrecognized tax benefit change within the next 12 months will not be significant.

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The Company has three operating and reportable segments:

(i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks and Reign Total Body Fuel® high performance energy drinks, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party Products.

(i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party Products.

The Company’s Monster Energy® Drinks segment primarily generates net operating revenues by selling ready-to-drink packaged drinks primarily to bottlers/distributors.

In some cases, the Company sells ready-to-drink packaged drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

The Company’s Strategic Brands segment primarily generates net operating revenues by selling “concentrates” and/or “beverage bases” to authorized bottling and canning operations.

7 unchanged sentences

Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.” No asset information, other than goodwill and other intangible assets, has been provided in the Company’s reportable segments, as management does not measure or allocate such assets on a segment basis.

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the years ended December 31, 2020, 2019 and 2018 are as follows:

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the years ended December 31 are as follows:

Monster Energy® Drinks⁽¹⁾

10 unchanged sentences

(1) Includes $ 41.5 million, $ 42.1 million and $ 46.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, related to the recognition of deferred revenue.

(2) Includes $ 0.2 million, $ 11.3 million and $ 26.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, related to distributor termination costs.

Depreciation and amortization:

11 unchanged sentences

Reyes Coca-Cola Bottling, LLC accounted for approximately 10 %, 11 % and 11 % of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Coca-Cola European Partners accounted for approximately 10 % of the Company’s net sales for the years ended December 31, 2020, 2019 and 2018.

Coca-Cola Europacific Partners accounted for approximately 12 %, 10 % and 10 % of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Net sales to customers outside the United States amounted to $ 2.04 billion, $ 1.51 billion and $ 1.33 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

13 unchanged sentences

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2021 were $ 77.5 million, and are included as a reduction to net sales.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2020 were $ 21.4 million, and are included in operating expenses.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2021 were $ 28.7 million, and are included in operating expenses in the consolidated statements of income.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2020 were $ 56.5 million, and are included as a reduction to net sales.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2019 were $ 17.7 million, and are included in operating expenses.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2020 were $ 21.4 million, and are included in operating expenses in the consolidated statements of income.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2019 were $ 50.1 million, and are included as a reduction to net sales.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2018 were $ 14.8 million, and are included in operating expenses.

TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2019 were $ 17.7 million, and are included in operating expenses in the consolidated statements of income.

Net sales to the TCCC Subsidiaries for the years ended December 31, 2021, 2020 and 2019 were $ 120.4 million, $ 83.3 million and $ 79.5 million, respectively.

1 unchanged sentence

Concentrate purchases from TCCC were $ 27.2 million, $ 23.9 million and $ 25.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s Monster Energy® brand energy drinks.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks.

Such contract manufacturing expenses were $ 31.5 million, $ 17.2 million and $ 17.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Accrued liabilities

In 2021, TCCC exercised its contract rights and began an examination in accordance with those rights for the years ended December 31, 2015 through December 31,2020.

One director of the Company through certain trusts, and a family member of one director are principal owners of a company that provides promotional materials to the Company.

Expenses incurred with such company in connection with promotional materials purchased during the years ended December 31, 2021, 2020 and 2019 were $ 3.6 million, $ 2.1 million and $ 1.5 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products.

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As of December 31, 2021, the Company’s equity investment is $ 1.4 million and is included in other assets (non-current) in the accompanying consolidated balance sheet at December 31, 2021.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

QUARTERLY FINANCIAL DATA (Unaudited)

Net Income per Common

Quarter ended:

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

Quarter ended:

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

Certain of the figures reported above may differ from previously reported figures for individual quarters due to rounding.

SUBSEQUENT EVENTS

On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $ 330.0 million in cash, subject to adjustments.

The transaction allows us to enter the alcohol beverage sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA and the Wasatch family of brands including Apricot Hefeweizen to our beverage portfolio.

The transaction does not include CANarchy’s stand-alone restaurants.

The Company’s organizational structure for its existing energy beverage business will remain unchanged.

CANarchy will function independently, retaining its own organizational structure and team.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures